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A Synthesis of the Lewis Development Model and Neoclassical Trade Models

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  • Gordon Menzies

    (University of Technology Sydney)

Abstract

A simplifed Lewis model with evidence-based assumptions treats all rural output as nontraded, and pays rural workers a convex combination of their average and marginal products. Lewis style transition is characterized as an increase in the weight on marginal product in the determination of the rural wage. This integration with standard trade models underscores the importance of trade for development, and predicts a real exchange rate appreciation for economies undergoing a Lewis style transition.

Suggested Citation

  • Gordon Menzies, 2018. "A Synthesis of the Lewis Development Model and Neoclassical Trade Models," Working Paper Series 46, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
  • Handle: RePEc:uts:ecowps:46
    as

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    File URL: https://www.uts.edu.au/sites/default/files/2018-07/Dual%20Economies%20UTS%20WP.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Dual Economy; Lewis Model; Neoclassical trade models;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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